Christmas club

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The Christmas club is a savings program that was first offered by various banks and credit unions in the United States beginning in the first half of the 20th century, and including the Great Depression. The concept is that bank customers deposit a set amount of money each week into a special savings account, and receive the money back at the end of the year for Christmas shopping.

Bank financial institution

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Credit union member-owned financial cooperative

A credit union is a member-owned financial cooperative, controlled by its members and operated on the principle of people helping people, providing its members credit at competitive rates as well as other financial services.

Great Depression 20th-century worldwide economic depression

The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. The timing of the Great Depression varied across nations; in most countries, it started in 1929 and lasted until the late 1930s. It was the longest, deepest, and most widespread depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how intensely the world's economy can decline.

Contents

Origins

The first known Christmas club started in 1909, when Merkel Landis, treasurer of the Carlisle (Pennsylvania) Trust Company, introduced the first Christmas savings fund. The club generated 350 customers who saved about $28 each, and the money was disbursed on December 1 of that year. [1] The January 2, 1920 edition of the Belvidere, Illinois Daily Republican announced that the town's State Farmers Bank was encouraging parents to enroll their children in the Christmas Banking Club "to develop self-reliance and the saving habit".

Merkel Landis

Merkel Landis was an American lawyer and banker. A native resident of Carlisle, Pennsylvania, he was the treasurer and president of Carlisle Trust Company in Pennsylvania. During that time he started the Christmas club savings program, now used by many banks nationwide.

Belvidere, Illinois City in Illinois, United States

Belvidere is a city in Boone County, Illinois, United States. The population was 25,585 as of the 2010 census. It is the county seat of Boone County. Belvidere is part of the Rockford, Illinois Metropolitan Statistical Area.

Promotion

For decades, financial institutions competed for the holiday savings business, offering enticing premiums and advertising items such as tokens. The Dime Saving Bank of Toledo, Ohio, issued a brass token "good for 25 cents in opening a Christmas account" for 1922-1923. [2] [3] > [4] There were also numbered tokens issued by the Atlantic Country Trust Co. in Atlantic City, New Jersey, inscribed on the reverse: "Join our Christmas Club and Have Money When You Need It Most." In the February 2006 issue of Forbes magazine, business writer James Surowiecki summarized the accounts' appeal: "The popularity of Christmas club accounts isn't a mystery; if their money was in a regular account, people assumed they'd spend it." [5] [3] [4]

Token coin coin-like object used instead of coins

In numismatics, token coins or trade tokens are coin-like objects used instead of coins. The field of token coins is part of exonumia and token coins are token money. Tokens have a denomination either shown or implied by size, color or shape. "Tokens" are often made of cheaper metals: copper, pewter, aluminium, brass and tin were commonly used, while bakelite, leather, porcelain, and other less durable materials are also known.

Toledo, Ohio City in Ohio, United States

Toledo is a city in and the county seat of Lucas County, Ohio, United States. Toledo is in northwest Ohio, at the western end of Lake Erie bordering the state of Michigan. The city was founded in 1833 on the west bank of the Maumee River, and originally incorporated as part of Monroe County, Michigan Territory. It was re-founded in 1837, after conclusion of the Toledo War, when it was incorporated in Ohio.

Atlantic City, New Jersey City in Atlantic County, New Jersey, U.S.

Atlantic City is a resort city in Atlantic County, New Jersey, United States, known for its casinos, boardwalk, and beaches. In 2010, the city had a population of 39,558. It was incorporated on May 1, 1854, from portions of Egg Harbor Township and Galloway Township. It borders Absecon, Brigantine, Pleasantville, Ventnor City, Egg Harbor Township, and the Atlantic Ocean.

Drawbacks

Key drawbacks of Christmas club accounts included low interest rates and a high number of restrictions, such as not allowing withdrawals unless fees were paid. Christmas clubs later fell out of favor with consumers. [upper-alpha 1]

Interest A sum paid for the use of money

Interest, in finance and economics, is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. It is distinct from a fee which the borrower may pay the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs.

Banks also incurred high costs in maintaining the accounts. According to Dennis Halpin, the CEO for the Capital Communications Federal Credit Union, the union had 3,500 Christmas club members in 1984. Each member required a check to be produced, signed, collated, and mailed, only for 70 percent to be returned to the bank to be deposited in another account.

Chief executive officer Highest-ranking corporate officer or administrator

The chief executive officer (CEO) or just chief executive (CE), is the most senior corporate, executive, or administrative officer in charge of managing an organization – especially an independent legal entity such as a company or nonprofit institution. CEOs lead a range of organizations, including public and private corporations, non-profit organizations and even some government organizations. The CEO of a corporation or company typically reports to the board of directors and is charged with maximizing the value of the entity, which may include maximizing the share price, market share, revenues or another element. In the non-profit and government sector, CEOs typically aim at achieving outcomes related to the organization's mission, such as reducing poverty, increasing literacy, etc.

Trivia

The television game show Jeopardy! offered the clue, "Bank president Merkel Landis founded this in Pennsylvania The correct respsonse: "What is The Christmas Club?" [9]

Jeopardy! is an American television game show created by Merv Griffin. The show features a quiz competition in which contestants are presented with general knowledge clues in the form of answers, and must phrase their responses in the form of questions. The original daytime version debuted on NBC on March 30, 1964, and aired until January 3, 1975. A weekly nighttime syndicated edition aired from September 1974 to September 1975, and a revival, The All-New Jeopardy!, ran on NBC from October 1978 to March 1979. The current version, a daily syndicated show produced by Sony Pictures Television, premiered on September 10, 1984.

Related Research Articles

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques (checks) and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms they are considered as cash.

The Philadelphia Savings Fund Society (PSFS), originally called the Philadelphia Saving Fund Society, was a savings bank headquartered in Philadelphia, Pennsylvania, United States. PSFS was founded in December 1816, the first savings bank to organize and do business in the United States. The bank would develop as one of the largest savings banks in the United States and became a Philadelphia institution. Generations of Philadelphians first opened accounts as children and became lifelong depositors.

A certificate of deposit (CD) is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions.

Savings account type of account maintained by retail financial institutions

A savings account is a deposit account held at a retail bank that pays interest but cannot be used directly as money in the narrow sense of a medium of exchange. These accounts let customers set aside a portion of their liquid assets while earning a monetary return.

Demand deposits, bank money or scriptural money are funds held in demand deposit accounts in commercial banks. These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country. Simply put, these would be funds like those held in a checking account.

Passbook paper book used to record bank transactions on a deposit account

A passbook or bankbook is a paper book used to record bank, or building society transactions on a deposit account.

Overdraft

An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply.

A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money markets. The interest rates paid are generally higher than those of savings accounts and transaction accounts; however, some banks will require higher minimum balances in money market accounts to avoid monthly fees and to earn interest.

ATM usage fees are the fees that many banks and interbank networks charge for the use of their automated teller machines (ATMs). In some cases, these fees are assessed solely for non-members of the bank; in other cases, they apply to all users.

Truth in Savings Act

The Truth in Savings Act (TISA) is a United States federal law that was passed on December 19, 1991. It was part of the larger Federal Deposit Insurance Corporation Improvement Act of 1991 and is implemented by Regulation DD. It established uniformity in the disclosure of terms and conditions regarding interest and fees when giving out information on or opening a new savings account. On passing this law, the US Congress noted that it would help promote economic stability, competition between depository institutions, and allow the consumer to make informed decisions.

KiwiSaver

The KiwiSaver scheme is a New Zealand savings scheme which came into operation from Monday, 2 July 2007. KiwiSaver fund are normally accessible only after the age of 65, but can also be used as a deposit for a first home.

Amsterdam Wisselbank

The Bank of Amsterdam was an early bank, vouched for by the city of Amsterdam, established in 1609, the precursor to, if not the first, modern central bank.

The Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.

Reserve Requirements for Depository Institutions is a Federal Reserve regulation which sets out reserve requirements for banks in the United States. It is more familiar to the public as the regulation that limits monthly withdrawals from savings accounts.

A deposit account is a savings account, current account or any other type of bank account that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank and represents the amount owed by the bank to the customer. Some banks may charge a fee for this service, while others may pay the customer interest on the funds deposited.

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and The United States, and as a bond in the United Kingdom and India. For a fixed deposit is that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. It's important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 4 and 7.50 percent. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years. These investments are safer than Post Office Schemes as they are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, DICGC guarantees amount up to ₹ 100000(about $1555) per depositor per bank. They also offer income tax and wealth tax benefits.

Economics of Christmas Economic aspects of Christmas

The economics of Christmas is significant because Christmas is typically a peak selling season for retailers in many nations around the world. Sales increase dramatically as people purchase gifts, decorations, and supplies to celebrate. In the U.S., the "Christmas shopping season" starts as early as October. In Canada, merchants begin advertising campaigns just before Halloween, and step up their marketing following Remembrance Day on 11 November. In the UK and Ireland, the Christmas shopping season starts from mid November, around the time when high street Christmas lights are turned on. In the United States, it has been calculated that a quarter of all personal spending takes place during the Christmas/holiday shopping season. Figures from the U.S. Census Bureau reveal that expenditure in department stores nationwide rose from $20.8 billion in November 2004 to $31.9 billion in December 2004, an increase of 54 percent. In other sectors, the pre-Christmas increase in spending was even greater, there being a November–December buying surge of 100 percent in bookstores and 170 percent in jewelry stores. In the same year employment in American retail stores rose from 1.6 million to 1.8 million in the two months leading up to Christmas.

Qapital is a personal finance mobile application (app) for the iOS and Android operating systems, developed by Qapital Inc. The app is designed to motivate users to save money through a gamification of their spending behavior. It moves money from a user's checking account to a separate Qapital account, when certain rules are triggered. Its database is used by psychology professor Dan Ariely to study consumer behavior. Qapital was released in Sweden in 2013, then in the US in early 2015. The application was later withdrawn from the Swedish market in April 2015, in order to focus on the US market.

References

Notes

  1. Key drawbacks of Christmas club accounts included low interest rates and a high number of restrictions, such as not allowing withdrawals unless fees were paid. The December 23, 1949 episode of the radio program Life of Riley highlighted these problems with an episode featuring Chester Riley visiting the bank to withdraw his Christmas club money. Riley had made only one $2 deposit, but the account had accumulated so many fees (for the passbook, for early withdrawal, and for the mailing of reminders) that Riley owed the bank another 25 cents. [6] [7] [8]

Citations

  1. Kane, Joseph Nathan (1974). Famous First Facts (4th ed.). Ace Books. p. 93.
  2. "Dime Savings Bank Christmas Token" (Photograph). Retrieved December 29, 2017.
  3. 1 2 Slabaugh, Arlie R. (1966) Christmas Tokens and Medals. Chicago: Author (ANA Library Catalogue No. RM85.C5S5)
  4. 1 2 Reback, Marilyn A. (December 2006) Numismatist, Volume 119, Number 12, pp. 57–60.
  5. Surowiecki, James. “Bitter Money and Christmas Clubs.” Forbes.com. Feb. 14, 2006.
  6. The Christmas Club (Audio), Old Time Radio Downloads, December 23, 1949
  7. Pinckney, Barbara (November 15, 2002). "Holiday Clubs Endure Despite Waning Popularity". The Business Review . Albany, NY.
  8. Sewall, Tim (December 5, 1997). "Christmas Club According Is Becoming a Thing of the Past". Memphis Business Journal .
  9. Chaston 1997, p. 2.

Bibliography